Interest rates could rise as early as next month after inflation jumped to three per cent.

The Office for National Statistics has confirmed UK inflation reached one per cent above the Bank of England’s target in September, the first time it has been that high since April 2017, and up from 2.9 per cent in August.

As well as signalling rising shop prices for Plymouth families, the inflation hike also raised the spectre of an interest rate increase – which would also hit Plymouth borrowers in the pocket.

With inflation at a five-year high, outstripping growth in pay, pressure is on the Bank of England to shove up the cost of borrowing from its record low of 0.25 per cent.

Prediction... Dave Ottley of Balance for Business

“We all know it will not stay at 0.25 per cent,” said Dave Ottley, of Plymouth-based independent banking consultancy Balance for Business. “It will go up – it certainly can’t come down more.

“It’s plausible and feasible they could go up over the next six months.

“The base will go up, but not jump quickly.”

Mr Ottley said banks are predicting the base rate to average out at 2.5 per cent over a 10 year period.

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“That means the overall base rate, over 10 years, would equate to 2.5 per cent,” he said. “So, in five years’ time we could have 2.5 per cent, well, we may do.

“But it’s still a good time to borrow money,” he said, and stressed that just as important as the base rate is the interest rate margin, the difference between the interest a bank pays on deposits and the interest it charges on loans.

Pressure... is mounting on Governor of the Bank of England Mark Carney to raise interest rates

In general, low interest rates mean more people borrow more money, spend more and causing the economy to grow and inflation to increase.

The opposite holds true for rising interest rates, as it takes some heat out of the economy and helps keep inflation in check.

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Inflation has been pushed up by higher food, transport and “recreational” costs, according to the ONS.

And it now means Bank of England Governor Mark Carney will have to write a letter to Chancellor Philip Hammond explaining why inflation CPI (Consumer Price Index) is one per cent above the two per cent target.

“More than five million public sector workers are now at breaking point as their wages take yet another hammering.”

Jacob Deppe, head of trading at online trading platform, Infinox, said: “The steady rise in CPI suggests it might finally be time for the Bank of England to get on with Governor Mark Carney’s ‘slow and gradual approach’ to rate rises rather than wait any longer.

Ross Andrews, director of listed bond provider Minerva Lending, said a rate hike “will be a mixed blessing if consumers have built up as much household debt as feared”.

Maike Currie, investment director for personal investing at Fidelity International, said: “Life is getting much more expensive with an increase in the cost of food, fuel and a last-minute price spike in flights all contributing to the rise in inflation.

“Meanwhile, our pay packets have stagnated despite UK unemployment being at a record low.”

But rising inflation is not bad news for everyone, and Mr Currie retirees and savers could win out with the state pension rising by whichever highest: September CPI inflation, average earnings or 2.5 per cent.

“September’s inflation figure is also used to determine how much investors and savers will be able to shelter in an ISA each year and by how much a number of benefits are increased in the new tax year, and in theory today’s number means welcome increases,” he said.